Tyler Technologies, Inc. (NYSE: TYL) today announced financial
results for the quarter ended December 31, 2010. Tyler reported
total revenue of $72.4 million and net income of $7.2 million, or
$0.21 per diluted share. In the same quarter last year, the Company
had revenue of $74.2 million and net income of $6.7 million, or
$0.18 per diluted share. Gross margin increased 20 basis points to
45.0 percent compared to 44.8 percent in the year-ago quarter.
Recurring software revenue from maintenance and subscriptions
was $40.5 million in the fourth quarter of 2010, an increase of 9.8
percent compared to the fourth quarter of 2009, and comprised 55.9
percent of the quarter’s total revenue.
Free cash flow for the quarter was $7.4 million (cash provided
by operating activities of $8.1 million minus capital expenditures
of $733,000), compared to $8.0 million (cash provided by operating
activities of $11.7 million minus capital expenditures of $3.7
million) in the fourth quarter of last year. EBITDA, or earnings
before interest, income taxes, depreciation and amortization,
totaled $13.3 million in the fourth quarter of 2010, compared to
$13.4 million in the prior-year quarter.
Total backlog was $281.4 million at December 31, 2010, compared
to $253.8 million at September 30, 2010, and $233.1 million at
December 31, 2009. Software-related backlog (excluding appraisal
services) was $248.2 million compared to $209.7 million at December
31, 2009.
Tyler ended the fourth quarter of 2010 with $4.3 million in cash
and investments and $115.2 million of availability under its $150.0
million revolving line of credit. During the fourth quarter, Tyler
repurchased approximately 209,000 shares of its common stock at an
average price of $20.30 per share. For the year ending December 31,
2010, Tyler repurchased approximately 3.6 million shares of its
common stock at an average price of $18.49 per share. As of
December 31, 2010, Tyler is authorized to repurchase up to 2.7
million additional shares.
“Considering the broader economic conditions and challenging
market environment, Tyler had a reasonably solid fourth quarter,”
said John Marr Jr., Tyler’s president and chief executive officer.
“We have experienced several quarters of softness in the
new-business market, with longer sales and implementation cycles
and less predictable timetables for purchasing decisions. As a
result, software license and software services revenues declined
from 2009 levels in each quarter of 2010. However, these declines
have been largely offset by strong year-over-year growth in
recurring revenues from subscriptions, which rose 35.6 percent, and
maintenance which grew almost 9 percent.
“We signed a number of large contracts in the fourth quarter,
including our largest software as a service (SaaS) contract to
date. A number of these deals had been in the new business pipeline
for an extended time, highlighting the inconsistent and
unpredictable timing of new bookings that we continue to experience
from quarter to quarter. Tyler finished the year with record total
backlog of signed contracts, which increased nearly 21 percent from
the end of 2009. Because of the growth in our subscription-based
offerings, as well as a higher proportion of contracts being
accounted for under percentage-of-completion accounting, a larger
percentage of our 2010 year-end backlog is expected to be
recognized beyond one year from now.
“We begin 2011 with confidence in the long-term business
prospects for Tyler,” said Mr. Marr. “As we did throughout 2010, we
invested aggressively in product development during the fourth
quarter, with an 11.8 percent increase in net
research-and-development expense. We believe that our competitive
position is stronger than ever and that we are well-positioned to
take advantage of an eventual return to a stronger economic
environment. However, until we see signs of sustained improvement,
we expect that the new-business environment in 2011 will continue
to be both challenging and unpredictable, and that growth will
again come primarily from recurring revenues.”
Annual Guidance for 2011
Total revenues for 2011 are currently expected to be in the
range of $306 million to $312 million. Tyler expects that diluted
earnings per share will be approximately $0.74 to $0.79. These
estimates include assumed pretax non-cash stock-based compensation
expense of approximately $6.5 million, or $0.15 per share after
taxes. The Company currently estimates that its effective tax rate
for 2011 will be approximately 38.3 percent. Tyler expects that
capital expenditures for the year will be between $5.0 million and
$5.5 million, and that depreciation and amortization expense will
be between $10.5 million and $11.0 million.
Tyler Technologies will hold a conference call on Thursday,
February 24 at noon Eastern Time to discuss the Company’s results.
To participate in the teleconference, please dial into the call a
few minutes before the start time: (877) 723-9522 (U.S. callers)
and (719) 325-4744 (international callers), and reference
confirmation code 7836562 when prompted. A replay will be available
two hours after the completion of the call through March 3, 2011.
To access the replay, please dial (888) 203-1112 (U.S. callers) and
(719) 457-0820 (international callers) and reference passcode
7836562. The live webcast and archived replay can also be accessed
at www.tylertech.com.
About Tyler Technologies,
Inc.
Based in Dallas, Tyler Technologies is a leading provider of
end-to-end information management solutions and services for local
governments. Tyler partners with clients to empower the public
sector–cities, counties, schools and other government entities–to
become more efficient, more accessible and more responsive to the
needs of citizens. Tyler's client base includes more than 9,000
local government offices throughout all 50 states, Canada, the
Caribbean and the United Kingdom. Forbes Magazine named Tyler as
one of “America’s 200 Best Small Companies” for three consecutive
years. More information about Tyler Technologies can be found at
www.tylertech.com.
Non-GAAP Measures
This press release discloses the financial measures of EBITDA
and free cash flow. These financial measures are not prepared in
accordance with generally accepted accounting principles (GAAP) and
are therefore considered non-GAAP financial measures. The non-GAAP
measures should be considered in addition to, and not as a
substitute for, or superior to, operating income, cash flows, or
other measures of financial performance prepared in accordance with
GAAP. The non-GAAP measures used by Tyler Technologies may be
different from non-GAAP measures used by other companies. We
believe the presentation of these non-GAAP financial measures
provides useful information to users of our financial statements
and is helpful to fully understand our past financial performance
and prospects for the future. We believe EBITDA and free cash flow
are widely used by investors, analysts, and other users of our
financial statements to analyze operating performance, provide
meaningful comparisons to prior periods and to compare our results
to those of other companies, and they provide a more complete
understanding of our underlying operational results and trends, as
well as our marketplace performance and our ability to generate
cash. In addition, we internally monitor and review these non-GAAP
financial measures on a consolidated basis as some of the primary
indicators management uses to evaluate Company performance and for
planning and forecasting future periods. Therefore, management
believes that EBITDA and free cash flow provide meaningful
supplemental information to the investor to fully assess the
financial performance, trends and future prospects of Tyler’s core
operations.
This document contains “forward-looking statements” within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934 that are not historical
in nature and typically address future or anticipated events,
trends, expectations or beliefs with respect to our financial
condition, results of operations or business. Forward-looking
statements often contain words such as “believes,” “expects,”
“anticipates,” “foresees,” “forecasts,” “estimates,” “plans,”
“intends,” “continues,” “may,” “will,” “should,” “projects,”
“might,” “could” or other similar words or phrases. Similarly,
statements that describe our business strategy, outlook,
objectives, plans, intentions or goals also are forward-looking
statements. We believe there is a reasonable basis for our
forward-looking statements, but they are inherently subject to
risks and uncertainties and actual results could differ materially
from the expectations and beliefs reflected in the forward-looking
statements. We presently consider the following to be among the
important factors that could cause actual results to differ
materially from our expectations and beliefs: (1) changes in the
budgets or regulatory environments of our customers, primarily
local and state governments, that could negatively impact
information technology spending; (2) our ability to achieve our
financial forecasts due to various factors, including project
delays by our customers, reductions in transaction size, fewer
transactions, delays in delivery of new products or releases or a
decline in our renewal rates for service agreements; (3) economic,
political and market conditions, including the recent global
economic and financial crisis, and the general tightening of access
to debt or equity capital; (4) technological and market risks
associated with the development of new products or services or of
new versions of existing or acquired products or services; (5) our
ability to successfully complete acquisitions and achieve growth or
operational synergies through the integration of acquired
businesses, while avoiding unanticipated costs and disruptions to
existing operations; (6) competition in the industry in which we
conduct business and the impact of competition on pricing, customer
retention and pressure for new products or services; (7) the
ability to attract and retain qualified personnel and dealing with
the loss or retirement of key members of management or other key
personnel; and (8) costs of compliance and any failure to comply
with government and stock exchange regulations. A detailed
discussion of these factors and other risks that affect our
business are described in our filings with the Securities and
Exchange Commission, including the detailed “Risk Factors”
contained in our most recent annual report on Form 10-K. We
expressly disclaim any obligation to publicly update or revise our
forward-looking statements.
TYLER TECHNOLOGIES, INC. CONDENSED INCOME STATEMENTS (Amounts in
thousands, except per share data) Three
Months Ended December 31, Twelve Months Ended December 31,
2010 2009
2010 2009 Revenues: Software licenses
$ 8,469 $ 11,296
$ 34,913 $ 42,131
Subscriptions
6,218 4,487
23,298 17,181 Software
services
16,060 19,460
68,340 80,405 Maintenance
34,298 32,406
135,655 124,512 Appraisal services
5,742 4,102
20,554 18,740 Hardware and other
1,652 2,466
5,868
7,317 Total revenues
72,439 74,217
288,628 290,286 Cost of revenues: Software licenses
985 1,365
3,456 5,440 Acquired software
398
369
1,592 1,411 Software services, maintenance and
subscriptions
33,901 34,679
138,085 137,199 Appraisal
services
3,468 2,307
12,910 11,518 Hardware and other
1,071 2,258
4,268
5,955 Total cost of revenues
39,823
40,978
160,311 161,523 Gross profit
32,616
33,239
128,317 128,763 Selling, general and
administrative expenses
17,143 18,507
69,480 70,115
Research and development expense
3,478 3,112
13,971
11,159 Amortization of customer and trade name intangibles
806 671
3,225
2,705 Operating income
11,189 10,949
41,641 44,784 Other expense, net
(1,030
) (27 )
(1,742 ) (146 )
Income before income taxes
10,159 10,922
39,899
44,638 Income tax provision
2,949 4,266
14,845 17,628 Net income
$ 7,210 $ 6,656
$ 25,054
$ 27,010 Earnings per common share: Basic
$ 0.22 $ 0.19
$ 0.74
$ 0.77 Diluted
$ 0.21 $ 0.18
$ 0.71 $ 0.74
EBITDA (1)
$ 13,306 $ 13,381
$
51,572 $ 54,265 Weighted average common
shares outstanding: Basic
32,285 35,062
34,075 35,240
Diluted
33,895 36,600
35,528 36,624 (1)
Reconciliation of EBITDA Three Months Ended December 31, Twelve
Months Ended December 31,
2010 2009
2010 2009 Net
income
$ 7,210 $ 6,656
$ 25,054 $
27,010 Amortization of customer and trade name intangibles
806 671
3,225 2,705 Depreciation and other
amortization included in cost of revenues, SG&A and other
expenses
1,905 1,761
7,563 6,792 Interest expense
included in other expense, net
436 27
885 130 Income
tax provision
2,949 4,266
14,845 17,628 EBITDA
$
13,306 $ 13,381
$ 51,572
$ 54,265 TYLER TECHNOLOGIES, INC. CONDENSED BALANCE
SHEETS (Amounts in thousands)
December 31,
December 31,
2010 2009 ASSETS Current assets: Cash
and cash equivalents
$ 2,114 $ 9,696 Restricted cash
equivalents
- 6,000 Short-term investments
available-for-sale
25 50 Accounts receivable, net
81,860 81,245 Other current assets
11,344 9,358
Deferred income taxes
3,106 3,338 Total
current assets
98,449 109,687 Accounts receivable,
long-term portion
1,231 1,018 Property and equipment, net
34,851 35,750 Non-current investments available-for-sale
2,126 1,976 Other assets: Goodwill and other
intangibles, net
125,138 122,029 Other
2,237
210 Total assets
$ 264,032 $ 270,670
LIABILITIES AND SHAREHOLDERS' EQUITY Current
liabilities: Accounts payable and accrued liabilities
$
22,059 $ 30,137 Deferred revenue
102,590
99,116 Total current liabilities
124,649 129,253
Revolving line of credit
26,500 - Deferred income
taxes
5,911 7,059 Shareholders' equity
106,972
134,358 Total liabilities and shareholders' equity
$ 264,032 $ 270,670 TYLER TECHNOLOGIES,
INC. CONDENSED STATEMENTS OF CASH FLOWS (In thousands)
Twelve months ended December 31,
2010 2009 Cash flows from
operating activities: Net income
$ 25,054 $ 27,010
Adjustments to reconcile net income to net cash provided by
operations: Depreciation and amortization
10,788 9,497
Share-based compensation expense
6,132 5,045 Provision for
losses-accounts receivable
1,161 1,538 Excess tax benefit
from exercise of share-based arrangements
(2,000 )
(1,125 ) Deferred income taxes
(959 ) (1,730 )
Changes in operating assets and liabilities, exclusive of effects
of acquired companies
(4,826 ) 2,706
Net cash provided by operating activities
35,350 42,941 Cash flows from
investing activities: Proceeds from sales of investments
75
2,500 Cost of acquisitions, net of cash acquired
(9,661
) (2,934 ) Additions to property and equipment
(4,930
) (12,352 ) Decrease (increase) in restricted investments
6,000 (918 ) (Increase) decrease in other
(178
) 46 Net cash used by investing activities
(8,694 ) (13,658 ) Cash flows
from financing activities: Increase (decrease) in net borrowings on
revolving line of credit
26,500 (8,000 ) Purchase of
treasury shares
(65,793 ) (18,263 ) Contributions
from employee stock purchase plan
1,901 1,494 Proceeds from
exercise of stock options
3,181 2,295 Debt issuance costs
(2,027 ) - Excess tax benefit from exercise of
share-based arrangements
2,000 1,125
Net cash used by financing activities
(34,238
) (21,349 ) Net (decrease) increase in cash
and cash equivalents
(7,582 ) 7,934 Cash and cash
equivalents at beginning of period
9,696
1,762 Cash and cash equivalents at end of
period
$ 2,114 $ 9,696
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